JPMorgan to Hike Small Business Lending as Credit Market Remains Debatable

Published on Apr 28, 2011

Summary

Read 'JPMorgan to Hike Small Business Lending as Credit Market Remains Debatable' at 'Time to Start Up,' the small business blog by BizFilings.

JPMorgan Chase, the nation's second-largest bank, announced Tuesday it will boost its lending to U.S. small businesses by 20 percent this year, marking a volume of $12 billion in credit to the sector.
"Small business owners are not only our neighbors but also the entrepreneurs that hire half of the employees in the United States," said Michael Cleary, CEO of business banking in retail financial services. "It's critical that we support small businesses as they continue to fuel the economic recovery across the country."
Chase, the banking sector of the financial service giant, increased its first quarter lending to firms with less than $20 million in annual sales by 64 percent. Last year, the bank became the No. 1 distributor of Small Business Administration-backed loans.
There has been debate in recent months over the state of the credit market and its impact on small businesses, with some groups, such as the National Federation of Independent Business, asserting small firms consistently achieve all of their credit needs. In fact, the NFIB reported that 93 percent of small businesses met their lending requirements in March.
Others, such as Federal Reserve Governor Elizabeth Duke, have argued that the issue is actually much more complex. In a speech earlier this month, Duke reasoned that perceptions of poor credit have actually discouraged firms from even applying for loans, thereby improving the acceptance rate but limiting distribution.
"Many small business owners were so convinced that their requests would be denied that they did not even apply for credit," Duke said. "Despite this restricted credit availability, small business owners, by a large margin, still considered their most significant problem to be weak sales."
However, Duke maintained that conditions are expected to improve in coming months, as private lenders and banks like JPMorgan Chase embrace greater levels of risk. Consumer spending and overall confidence will also help to stimulate the sector.
Still, other analysts, like Wall Street Journal contributor Angus Loten, have argued that banks are only lending to top-tier small companies and startups, while average-income firms have been struggling to access credit.
"Recent surveys of small-business owners suggest that lenders are targeting only the most credit-worthy businesses," Loten wrote in a February article. "Such firms tend to be at the upper end of Bank of America’s $20-million threshold for small business, if not well beyond."